Examination of Witnesses (Questions 220
- 239)
TUESDAY 20 FEBRUARY 2007
DTI/FCO, UKTI, DTI
Q220 Mr Weir: Is it up and running
yet?
Mr McCartney: The officers are
in place as part of that new team, as I understand it.
Q221 Mr Weir: But there have been
no early wins from it so far?
Mr McCartney: Not to my knowledge.
Q222 Judy Mallaber: I want to ask
about the way that UKTI resources are focused. It appeared to
us that there was some confusion about the interplay between the
sectoral approach and country-based approach in UKTI strategy,
and whether what we were doing was to focus primarily on UKTI
assistance in country-based programmes, for example directly with
Brazil, or looking at it more on a sectoral basis regardless of
countries. Can you explain the thinking behind the balance with
which UKTI looks at that?
Mr McCartney: In terms of targeting
resources, we are looking at each of the key marketplaces and
what advantages we have and the areas we can penetrate those markets.
What are the sectors to which we can gain access and in which
we can do significant trade either directly or in partnership
with existing companies in the country concerned?
Q223 Judy Mallaber: Are you saying
that you are looking primarily at the country as the marketplace,
say, Brazil, or primarily at the broader sector and, going from
that point, looking at particular countries?
Mr McCartney: Obviously, we look
at the country and in the country there will be sectors where
we can have a distinct advantage. It is a matter of identifying
with industry or the financial services what those sectors are
and then providing resources in country and back here to achieve
penetration of those sectors. That is why we have set out the
priorities for next year which I have already placed on record.
It is a consistent policy. There is no point in selecting a country
and then taking no account of its marketplace, its consumer needs
and what our skills are. If we do not do that we will get nowhere.
That is why a great deal of political, economic and industrial
intelligence is gathered to secure what we consider to be the
best bet to gain access to the marketplaces in those countries.
Q224 Judy Mallaber: I think that
is a slight misunderstanding in the context of my question. I
also understood that UKTI looked at, say, aerospace or the biotech
industry, not just in relation to a specific country. It takes
a sector and looks at it overall and decides which countries should
be concentrated upon to assist the companies in that sector. How
does that match up with when you start by looking at a specific
country like Brazil and identifying the marketplaces within it?
Where is the priority? Do you start off by looking at a sector
and companies in that sector and where in the world you can focus
upon, or do you begin by looking at the country? How do you marry
the two?
Mr McCartney: Obviously, you make
a profile of each of the countries in which you are working. There
is no inconsistency here. Within Brazil's profile there will be
glaring examples of the sectors where we as a country can gain
advantage, and it is those sectors on which we will concentrate.
It is also true that there is an emerging R&D potential in
terms of energy security and climate change. We are potentially
a market leader in research and development into new products
in new marketplaces. Obviously, we will sit down and look at that
sector in a global sense and then look at the market opportunities
for that. We will do that as well. As with the aerospace industry,
there are global opportunities and there are also specific marketplaces
where one has to negotiate specific contracts. There is no inconsistency
with the policy.
Q225 Judy Mallaber: Can you give
any breakdown of the proportion of resources that goes into global
analysis of sectors and specific country-based analysis? Is it
possible to do that? I am not saying that one or the other ends
up being the most effective, but I am very unclear as to the balance
of analysis and resources.
Mr McCartney: I shall have to
send you details of that. I may be wrong, but I do not see us
spending time doing a budget in that respect. We have good economic
intelligence in terms of the marketplaces in which we want to
operate, and we have good working relationships in terms of the
end uses that impact globally, alongside those small and medium-size
enterprises that have niche markets. We put all that together
and provide a service. There is no inconsistency in that. But
if the Committee would like me to give a breakdown of resources
that we expend in these fields I am happy to provide it, if we
have it available.
Q226 Chairman: I feel rather sorry
for UKTI staff both in London and in post because they keep having
conflicting priorities. One day it is all sectors; then it is
emerging markets; then it is a country focus; then it is new exports;
then it is all done through the RDAs. UKTI seems to have constantly
shifting priorities which are quite difficult to manage.
Mr McCartney: I do not accept
that for a second, and I am not being defensive about it. UKTI
was reorganised for the simple reason that we did not want an
organisation that was not fit for purpose in the face of the challenge
of globalisation. This was a good organisation, but the challenges
that it faces now and in the next decade are different from those
10 years ago when it was called something other than UKTI. It
had a range of names. To reorganise its strength and to co-ordinate
it so it takes account of the changing marketplaces we live and
work in is important. If we do not do that we are not providing
the service that British industry needs.
Q227 Chairman: We shall come back
to that with Andrew Cahn next week. In the context of Brazil and
Mercosur with the new emphasis on new and emerging markets what
you are doing net between 2005 and 2010 in South America is to
cut staff by 1.5 full-time equivalent posts. That was a Parliamentary
Answer to a question which I struggled to obtain. It has been
said there is a huge focus on Brazil. What it means is that there
will be two more posts in Brazil over a five-year period. I do
not get a sense of a huge shift in priorities within the organisation.
Mr McCartney: My figures show
that there are 52.7 UKTI staff working in Mercosur and that will
increase to 55.7 during the coming financial year (2007-08). The
Paraguay market is served by our embassy staff and ambassador
only in Buenos Aires on a case-by-case basis given the size of
that marketplace and our engagement with it. As to programme activities,
we are part of the comprehensive spending review.
Q228 Chairman: The figures that you
are giving me are different from the ones provided in the Parliamentary
Answer. By my reckoning, at present we are well below 50 in the
Mercosur countries according to the answer in front of me, but
we will explore it later. What I have here shows that for Brazil
it was 39 in 2005.
Mr McCartney: What is the date
of the Parliamentary Answer?
Q229 Chairman: It is dated 6 February
of this year. Brazil is at 39 UKTI full-time equivalent staff
in 2005, and it is 41 in 2010. That does not suggest a huge shift
in priority.
Mr McCartney: With respect, it
is an increase in staff in areas where we want to improve. Remember
that the staff are already there; they have already been allocated
work programmes. This is additional staff.
Q230 Chairman: But a net increase
of two staff for Brazil which is the subject of huge focus for
UKTI has been achieved by ending all representation in Uruguay.
You have taken the 1.9 people in Uruguay and moved them to Brazil.
Mr McCartney: Yes; it is a priority.
Q231 Chairman: In UKTI's evidence
to us I read: "Uruguay's hallmarks are political stability
and low corruption, combined with an open financial system. These
are important assets, given the relative instability of some of
Uruguay's neighbours." Uruguay does not have many neighbours:
basically, we are talking about Brazil, Argentina and Paraguay.
"Companies interested in Uruguay appreciate the high general
level of education and the overall infrastructure quality. Uruguay
has the highest level of literacy in Latin America and a number
of good universities." Tata Consultancy Services has recently
made Uruguay its headquarters for the whole of South America because
it was attracted by precisely those things. I have seen British
investments in Uruguay which are doing extremely well in that
market. There is huge opportunity and yet in the result we just
end it. Why?
Mr McCartney: We are not ending
investment in the area. Remember that Uruguay is our 105th export
market with a population of three million. It is a small market
and will continue to be so. We are able to service it in a different
way, and quite rightly so. No one suggests for a moment that UKTI
has the resources to cover every single country and market.
Q232 Chairman: But trade is a very
important part of foreign diplomatic policy these days.
Mr McCartney: But it is covered
in a different way, as is Paraguay which is the 144th trading
market. We have both. You cannot pick and choose. You are talking
of all of the countries in the region. I am answering your question.
Uruguay and Paraguay are countries that are well down in terms
of the relationship and in terms of trade and, therefore, they
are managed differently. Companies going into them will get a
service but a different one.
Q233 Chairman: How will they get
a service in Uruguay from now on? There is increasing evidence
of British interests in Uruguay. Another major investment is to
be made by an aerospace company there at present. Linpac have
a very successful operation there.
Mr McCartney: But we still have
an embassy and staff in Uruguay.
Q234 Chairman: The embassy will have
two full-time British diplomats and that will be it.
Mr McCartney: But diplomats are
trained in this. A decade ago there was a change in the whole
culture of diplomatic posts. Today everybody who works at a diplomatic
post has a brief in terms of developing UK interests in trade.
That is the reality of it, and in this post those who are there
will do that. There is specific work to be done. It will be done
in post, and if there is a big trade deal or investment there
resources will be made available to meet it, but it is done on
that basis.
Q235 Chairman: But if Mercosur develops
as the participant countries hope—I appreciate that at present
there is some debate about Uruguay's nascent relationship with
the United States of America—the institutions of that body
will be based in Uruguay and therefore it will become the Belgium
of Mercosur. It seems very odd that at this stage in the run-up
to Mercosur, which you talked about so lyrically earlier, effectively
you are ending our commercial representation in that country.
Mr McCartney: We have an embassy
in Uruguay and we will continue to have diplomatic investment
in that country.
Q236 Chairman: How many diplomatic
staff do we have in Uruguay?
Mr McCartney: If you do not mind
my saying so, in earlier question there was discussion about whether
or not Mercosur would ever develop further than it has. At this
point, with scarce resources you cannot ask me to start shifting
resources around the globe to a country which is the 105th export
market when there is no guarantee of any future development of
Mercosur, and to do it by taking resources away from a marketplace
which, if it increased its potential by only 1%, would represent
tens of millions of additional exports and potential jobs. It
is about prioritisation.
Q237 Chairman: What is interesting,
Minister, is that Uruguay is a very long-standing friend of Britain
and over the years it has been very helpful to us. What they see
is a steady downgrading in the total diplomatic representation
in the country. Not looking just at Uruguay but more generally,
do you think it is always wise to separate out so rigorously our
trade representation from our broader diplomatic representation,
because the outside world sees British diplomatic interests in
these countries being reduced? That may be contrary to our broader
interests, leaving aside our trade interests.
Mr McCartney: I have just said
that all of our embassy staff in whatever country they operate
have as part of their role British trade interests and investment
interests and will operate as such. They are connected with and
can utilise the full gamut of our services and will draw down
on them as required. It just means that it is done differently
in Uruguay from the way it is done in Brazil.
Chairman: I think that we will have to
agree to differ.
Q238 Mr Hoyle: Minister, I think
it ought to be looked at again, because Mercosur's headquarters
are there and growth will take place there. UK industry is more
attracted to Uruguay now. I feel that the staff reductions—we
have not had the figure from you—that have taken place over
the past 10 years have been significant. There is now a very small
staff based in Uruguay. We keep hearing about where Paraguay features
in the list. The fact is that we do not even have an office in
Paraguay and we are now selling the embassy. I think that we have
disposed of half of it and the other half is up for sale. This
is about Uruguay. What can we do to ensure—I know that resources
are scarce—that the emphasis goes back to Uruguay to build
up the post and the commitment that UK industry is looking to
use? As the Chairman said, the fact is that Mercosur's headquarters
are based there and we ought to have representation there.
Mr McCartney: I should like to
know about your figures for increased involvement in UK trade
and investment.
Q239 Mr Hoyle: I visited Linpac—I
do not know whether you have been there—which is a huge
investment by a Yorkshire company. We know that there is an aerospace
company that has been looking at what it can do in the armed forces,
so there are opportunities for UK companies.
Mr McCartney: But those companies
including Linpac may have used our services there. When the initial
report was done the reason it was downgraded and resources were
moved was the lack of interest in the services there.
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